New Rules of Marketing
Bruce I. Knight, Under Secretary for
Marketing and Regulatory Programs
Texas & Southwestern Cattle Raisers Association
Marketing Committee
Corpus Christi, TX
March 16, 2008
Thank you, John (Welch). I’m glad to be back with you this afternoon.
I want to spend our time together talking about animal ID and our plans to move forward with it and how it ties into marketing and COOL. I also want to go into more detail about trade opportunities. Then we’ll have time for questions.
Animal ID is about animal but NAIS is going be a platform component of the marketing program for livestock in the future. We are developing it as a modern, tech-savvy, up-to-date system for responding to outbreaks of serious animal diseases.
NAIS is designed to cut losses, reduce delays and retain markets. Ultimately, we hope to put traceability data within USDA hands within 48 hours of an outbreak.
The goal is to significantly reduce the time needed to conduct disease investigations.
Animal ID is a cooperative effort among states, the Animal and Plant Health Inspection Service and industry. It’s one of USDA’s top priorities—as our new Secretary of Agriculture, Ed Schafer, made clear when he spoke to the National Cattlemen’s Beef Association recently.
I’m pleased that over the past 18 months, the discussion on animal ID in the U.S. has changed. It’s no longer about whether or not animal ID is a good idea. It is a good idea—and I think almost everyone now acknowledges that.
Today, we’re talking about how best to implement it and how quickly it can be operational. And I want to share with you what we’re doing.
Premises Registration
The first step in developing NAIS is to encourage farmers and ranchers to register their premises. Registration tells us who’s raising livestock, so if there’s a problem, we can reach producers.
To date, we have nearly 453,000 premises registered—out of 1.4 million. We are working hard to increase that number. We’ve developed cooperative agreements with major industry groups—including the National Cattlemen’s Foundation—to promote and secure registrations.
I know that the Texas and Southwestern Cattle Association has also encouraged each of you to sign up—and I hope you have. Today, twelve states have more than 50 percent of their premises registered.
When it comes to Texas and registrations, there’s good news and bad news. The good news is that among the 50 states, Texas has the third highest number of premises registered—nearly 30,800. The bad news is that’s only 16.5% of your 187,000+ premises—and ranks you 33rd out of 50 states in getting your producers to sign up.
If you haven’t yet registered your premises, I urge you to do so. To make this voluntary system work, we need everyone’s participation.
Registering is easy. It’s free. It’s the right thing to do to protect your herd health. As a rancher, I’ve done it, and you should do it, too.
Traceability
As part of our effort to move NAIS forward, the Animal and Plant Health Inspection Service has developed a business plan—a roadmap for increasing traceability. The goal, as I mentioned earlier, is 48-hour traceability when there is an emerging event.
The business plan sets priorities, focusing on areas where we can accomplish the most to reach critical mass—getting 70% of the animals in a species identified and traceable to the premises of origin.
The business plan relies on seven strategies. I want to talk with you this afternoon about just one of those—the first one. This is our effort to prioritize species.
And guess what heads the list. Right … beef cattle.
Our top priority is the primary food animals—cattle, sheep and goats, swine, poultry—plus competition horses because they move around a lot. The highest priority within that category is breeding stock, particularly beef and dairy cattle. These priorities should match well with TSCRA goals.
We set the priorities based on:
- Potential for a disease event of significant economic impact
- Risk of disease to human health
- Current traceback capabilities
- Economic value, and
- Potential for disease to spread to other livestock species.
One of the difficulties we face is that these days fewer beef producers are participating in disease programs as eradication efforts have been successful. So, getting cattle operations involved in NAIS is critical to traceability.
Three weeks ago, I met with our state NAIS coordinators and the APHIS Area Veterinarians-in-Charge. I was meeting with them on how to improve the system that we use to effect traceability.
We are looking to our vets to reach critical location points where animals are commingled—like auction barns, feedlots and fairgrounds. We have a lot of ground to cover, but we are determined to succeed.
Additional Efforts on NAIS
I want to share a couple of other efforts that we’re involved in regarding animal ID. One is a benefit-cost analysis of NAIS that researchers at Kansas State University are conducting for us. To the best of our knowledge, no other country has studied this.
It is a massive undertaking, but necessary to advance the U.S. ID system. We believe this study will provide empirical evidence that animal ID is worth the effort we’re putting into it—and that producers put into it also.
Even as we’re encouraging livestock producers to register their premises and then take the next step and tag their animals, we’ve determined that APHIS will do the same. So, we’ve purchased 1.5 million “840” official ID tags for use in our animal disease programs.
APHIS is also drafting proposed regulations that would require the first point of import and the first point of export to be registered premises. This will be a significant step in improving traceability.
We also have created a brand working group that has been tasked with finding the right intersection between brand laws and NAIS. I look forward to their recommendation.
Marketing Efforts
In the future, NAIS will undergird our marketing efforts. It will support marketing claims that are increasingly the key to further expansion of trade.
The Agricultural Marketing Service is developing a business plan to outline the interdependency of our marketing programs with NAIS. These marketing programs include the Export Verification Program and the National Organic Program plus voluntary marketing claims, such as grass-fed and non-hormone treated cattle, along with the new “naturally raised” claim AMS is currently working on.
Here in the U.S. these programs help producers command a premium for their products. Abroad, they may be the key that opens the door for trade.
Participating in NAIS will facilitate compliance with the AMS regulatory programs. It also will help provide the necessary data to substantiate marketing claims.
International Trade
I want to touch briefly on the importance of trade to U.S. agriculture and then talk a little more about what we see ahead, particularly for beef cattle.
As I said this morning, we have a new, significantly higher projection for U.S. agricultural exports this year—$101 billion. We’re essentially looking at trade value that is just shy of doubling over the past eight years. That’s amazing!
Despite the setbacks involved with the BSE crisis in 2003, we are getting back on track with beef exports. My deputy, Chuck Lambert, is on the road overseas almost full-time, seeking to open and expand markets.
We’ve been using an export verification system, particularly with our Asian trading partners, to assure them of the safety of our beef. Unfortunately, that system remains on hold with South Korea following their finding part of a vertebral column, which is banned, in a U.S. shipment last August.
However, U.S. meat processors are continuing to ship beef to Japan—about a million pounds per week—and the 23 additional countries that require an EV program to import U.S. beef. AMS is auditing 118 facilities under the EV program for beef.
With the help of these programs, U.S. beef and veal exports are rising—up by more than 25 percent in volume last year. Further, beef exports are expected to rise nearly 20 percent again this year.
As you know, Mexico is our top export market for beef, and we talked this morning about normalizing trade with Mexico. Although it’s a long way from Texas, Canada buys the second largest share of our beef.
The fact that these two countries are our most significant trading partners involves more than proximity. It’s at least partly due to NAFTA—the North American Free Trade Agreement signed in 1994. Over the past 13 years, our exports to these two countries have grown from $10 billion to $25 billion per year.
More recently, CAFTA—the Central American Free Trade Agreement has boosted U.S. exports to our Central American neighbors.
Also important in promoting two-way trade are bilateral agreements. Congress approved an agreement with Peru in December that will be worth $700 million in agricultural exports from the U.S. once it’s fully effective.
Three additional agreements are awaiting Congressional approval. Like the Peru agreement, all of them are supported by more than 40 major U.S. farm organizations. They will make trade a two-way street instead of a one-way street.
Together, agreements with Panama, Colombia and South Korea will be worth nearly $2.5 billion when fully implemented.
I want to speak with you specifically about the agreement with Colombia. Today, 99.9 percent of Colombia’s agricultural exports enter the U.S. duty-free. It’s time for U.S. exports to get duty-free access to the Colombian market.
Once Congress approves the agreement, more than 50 percent of U.S. agricultural exports will enter Colombia without tariffs—including high quality beef, which currently carries an 80 percent duty. The remaining tariffs will be eliminated within 15 years, but immediately U.S. exporters of standard quality beef cuts will get duty-free access for the first 2,100 tons, with 5 percent more each year.
There will be a 4,642-ton tariff rate quota for variety meats that also will grow each year. Tariffs for all beef products will be eliminated within 10 years.
Last year, the U.S. sent $386,000 of beef and beef products to Columbia. As the nation’s fourth largest exporter of live animals and beef, Texas clearly stands to benefit from this agreement. We hope that Congress will approve it shortly.
Trade and NAIS
I spoke earlier about animal ID and marketing. But there’s an even more direct link with trade. And that’s the fact that our competitors who have a traceability system—Canada and Australia, for example—are touting their systems as a reason to buy their beef.
And our customers are demanding it.
At the NCBA convention a few weeks ago, Dr. Gary Smith, a professor at Colorado State University, made it very clear: If you’re producing for the global market, you must have a high quality beef product to sell. But to gain access to the market, you must be able to demonstrate traceability along with a concern for animal welfare.
He said that by the end of this year, the European Union, Japan and South Korea will have mandatory “farm-to-fork” ID and traceability within their borders. Once they require traceability for products produced at home, they can demand it from others that want to export to them—and they will.
Other countries, which don’t yet have their own traceability systems fully in place and therefore can’t, under WTO rules, require it of other countries, will still prefer to purchase from sources that can demonstrate traceability. Dr. Smith cited Canada, Taiwan, some South American countries and most Arabian Gulf nations as examples of countries that are interested in traceability.
He pointed out that not every single U.S. producer will have to demonstrate traceability—only those in supply-chains that want to sell abroad. But the sooner producers in the U.S. and around the world get on board with animal ID, the more options they will have to market their livestock.
In other words, traceability is the key to international sales and market expansion. Animal ID will smooth the way for producers everywhere.
Opening Markets for Live Animals
As we seek to expand markets for U.S. beef, we’re looking to open markets for live animals as well as meat. Once we received the “controlled risk” designation from OIE—the World Animal Health Organization—last May, we sought to encourage our trading partners to accept live animals, semen and embryos as well as meat. This has been somewhat more difficult since these products have been viewed as riskier and import requirements may be more stringent.
Over the past year, Panama, Costa Rica, Honduras, Turkey, Morocco and Albania have opened their markets to the U.S. In addition, we’ve resolved all BSE issues with Canada—I’ll talk more about that in a minute.
As we all know, Mexico and Canada recently signed an agreement permitting import of Canadian breeding cattle by Mexico (and we’re disappointed that the agreement failed to recognize OIE standards.)
I mentioned this morning our efforts to get Mexico to lift import restrictions on import of older U.S. cattle. We’re also continuing to work with Mexico on TB eradication. Like the fever tick, this poses a real problem for us—and it’s another example of the importance of traceability.
Last year we proposed a 5-year plan that would encourage the Mexican TB Eradication Program to achieve equivalency with the U.S. program by the end of 2012. This is important because over the past five years—Fiscal Years 2003 to 2007—of the 166 confirmed cases of bovine tuberculosis detected in U.S. slaughter facilities, 120 were determined to be of Mexican origin. That’s more than 70 percent.
Later this year, APHIS will propose a domestic TB rule for cattle and bison at the same time it proposes an import rule—harmonizing the two. The import rule will include proposed TB status classifications for Mexican states and zones as well as Canadian provinces and Australian states.
In addition, we’ve been working with Andean countries to encourage acceptance of live animals—particularly Bolivia, Colombia, Ecuador and Peru.
Harmonizing with OIE
Even while we’re encouraging our trading partners to follow OIE rules, we need to make some changes in U.S. rules to align them with international guidelines. We took the first step toward harmonizing our regulations by publishing the Minimal Risk Rule, which normalized trade with Canada. It went into effect mid-November last year.
The next step is to amend all of our BSE import-related regulations to make them consistent with international guidelines. We plan to publish a comprehensive BSE proposed rule this coming August or September to harmonize our standards with OIE.
We need to lead by example, stressing the importance of OIE standards, to open our markets as we encourage other countries to open theirs. At same time, we’re promoting similar action—and acceptance of the OIE designation of “controlled risk”—by our trading partners. We all need to base our trading rules on sound science—and then follow them.
COOL
Before we close, I want to touch on a related issue—Country of Origin Labeling.
U.S. law calls for labeling for most red meat and produce on September 30, 2008.
(Congress has delayed this date twice.) Labels for fish and shellfish have been required since April 2005.
Both the House and Senate farm bills that the conference committee is working with would make some changes in COOL, such as providing for three possible labels—domestic, foreign, and “may be of mixed or multiple origins.” If the implementation date remains the same, we will need to get the regulations ready very quickly so we need the farm bill completed right away to do that.
Regardless of the final determinations on the specific labels that will be required, we want to be clear that producers who participate in NAIS will essentially have a “safe harbor” for COOL with NAIS. It’s a clear path to identifying the history of your livestock and the COOL label that’s appropriate for your beef.
Conclusion
In closing, I think it’s clear we live in a shrinking world marked by expanding opportunities. We must do all that we can to position ourselves to take advantage of newly emerging markets as well as to renew and enlarge trade with old friends.
I encourage you to use animal ID as a tool to safeguard your herd as well as track and improve the quality of your beef. Your efforts will help demonstrate to our domestic customers as well as our international trading partners our commitment to providing high quality, healthful food for their tables.